Pensions Now An Issue In Lansing Budget Talks

Tom Krug, Executive Director of the Capitol City Lodge #141 of the Fraternal Order of Police, disagrees with Lansing Mayor Virg Bernero about the urgency of dealing with pension fund shortfalls.

Photo: Scott Pohl
/ WKAR

The Lansing City Council has a budget wrap-up meeting today, leading up to next Monday’s vote to finalize a budget for the coming fiscal year.

Hovering over the meeting is the recent news that Lansing’s two pension funds need an additional $3 million to meet their commitments to retirees.

WKAR’s Scott Pohl reports that while mayor Virg Benero is pushing to deal with the pension system now, one union leader doesn’t see the need for hasty action.

Lansing has two pension funds. One, governing police and fire retirees, needs $1.9 million. The other, covering other retirees, needs $1.1 million. Both of those figures were provided in a draft study of the two funds done by a Washington-based actuarial firm.

Just last year, an extra $2 million was devoted to pensions because of the poor performance of the pension systems. The new estimates come on the heels of a third quarter budget report Mayor Virg Bernero calls “dismal."

In the long run, he says, that’s unsustainable.

“This puts us on a trajectory to eat into our general fund, our operational budget, in order to support the cost of retiree benefits,” states Bernero. “That’s the reality. That’s the point. The point is we’re on a collision course between providing pensioners benefits and providing current year services.”

Tom Krug is Executive Director of the Capitol City Lodge #141 of the Fraternal Order of Police, representing Lansing cops. He says the pension boards get these reports every five years, and the new report should not have come as a surprise.

“I don’t think it was a shock to anybody that the funds in the retirement system are down,” Krug says. “They are in everyone’s. But the Lansing retirement system, compared to a lot of other retirement systems, is in pretty good financial shape.”

Krug’s position is that in last year’s contract talks, the city had a bigger focus on health care costs than on retirement costs, and that health care concessions saved the city more money than would have been found in the arena of pensions.

Timing is an issue

Concerns have been raised about the news regarding the need for another $3 million coming so close to next week’s vote on the budget. That doesn’t concern Mayor Bernero, who says it beats getting that kind of news after the budget vote.

“This report came in when it came in,” explains Bernero. “I didn’t commission this report; the pension board did, and it just came in. As far as the third quarter budget report, it comes in in the third quarter, and here it is. It just so happens that both of these are bad news, and they impact the budget, and they should impact our decision making.”

Krug concedes that pensions will need to be addressed in the future, but disagrees with the mayor about the urgency of the situation.

“These costs have been there,” Krug says. “This is not a shock to the city. We’re not going to give concessions just over this one story on the pension. Is it going to be an issue for us? Absolutely.”

For his part, Bernero sees no need to delay building the pension systems needs into the city council’s ongoing budget deliberations.

“Well, when do we hit the panic button?” asks Bernero. “When we’re in the condition of Flint, or Detroit, or Benton Harbor? And by the way, nobody’s really talking about hitting the panic button. What we’re talking about is recognizing the situation. We’re talking about seeing the canary in the mine, that the canary’s dying, and we need to act now before the rest of us run out of oxygen.”

One other factor looms over the budgeting process in Lansing. The city is expecting there to be a deficit in the current budget when the fiscal year ends June 30, because income tax revenues are down. The size of that deficit isn’t yet clear.

Some sense will have to be made of all this by Monday, when the council will have to agree on a 2012-13 budget.